Creating a valid contract—statutory exceptions
Creating a valid contract—statutory exceptions

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Creating a valid contract—statutory exceptions
  • Excepted contracts
  • Constructive trusts
  • Requirement for certainty
  • Overlap with proprietary estoppel
  • Subsequent contract for sale

Excepted contracts

The contractual formalities set out in Law of Property (Miscellaneous) Provisions Act 1989, s 2 (LP(MP)A 1989) do not apply to contracts:

  1. for leases not exceeding three years (ie short leases under Law of Property Act 1925, s 54)

  2. made in the course of a public auction

  3. regulated under Financial Services and Markets Act 2000 (other than a regulated mortgage contract, regulated home reversion plan, regulated purchase plan or a regulated sale and rent back agreement)

Constructive trusts

The statutory formalities set out in Law of Property (Miscellaneous Provisions) Act 1989, s 2 do not affect the creation or operation of resulting, implied or constructive trusts. They are not required to be evidenced in writing.

A constructive trust arises in connection with the legal title to property where one party has so conducted themselves that it would be inequitable to allow them to deny to the other party a beneficial interest in the property acquired. This will be the case where:

  1. there was a common intention that both parties should have a beneficial interest, and

  2. the claimant has acted to their detriment in the belief that they were acquiring a beneficial interest

In such cases, the court may excuse non-compliance with LP(MP)A 1989, s 2 where equity demands enforcement of the parties' bargain. The House of Lords’ ruling